Substantive Item- Overview report of InvestSK, in additional to appendices outlining the governance, business structure, financial statements and business plan of the company.
The Chief Executive of InvestSK gave a presentation to the Committee, which covered InvestSK’s background, establishment and the outcomes achieved to date.
In its earliest iteration in September 2017, InvestSK was a brand rather than a company. It was an informal collaboration that focussed on business growth and investment, property and place-making. In June 2018 a formal Memorandum of Understanding was agreed, which set out InvestSK’s remit for the funding it received from SKDC. In October 2018, it began trading as a not-for-profit private company.
Areas of activity that were set out in the Memorandum of Understanding included:
- Engaging with businesses to maximise growth and inward investment
- Leading on a collaborative approach to skills development
- Marketing InvestSK to existing and new businesses
- Developing a strategy to promote the district’s visitor attractions
- Exploring and optimising access to external funding opportunities
- Establishing a heritage regeneration programme across the district
- Leading on arts and cultural growth initiatives
- Leading on the enhancement of the district’s market towns
- Leading on an implementation plan for Grantham and masterplans for the towns
Interventions had then been put in place to address each theme.
A breakdown by theme setting out the funding provided by SKDC in 2018/19 and 2019/20 was supplied. During the company’s early life, funding primarily covered staff and office overheads, then, as projects came on-stream it covered additional project staff.
The presentation also showed outputs against the objectives in the Memorandum of Understanding setting out achievements and the calculated economic impact. It was noted, however, that in some areas of activity, showing pure economic impact was not straightforward.
Members were advised that since its creation, InvestSK had built strong connections into the local business community; this had led to an increase in the number of local businesses that were exploring apprenticeships.
Reference was made to the number of vacant units in the town centres. Whilst the rate of empty units had seen a small increase, InvestSK considered the occupancy rate to be favourable in the context of performance nationally. It was also noted that a number of single sites skewed the figures.
Other outputs related to arts and culture, sports development, external funding for groups, marketing and additional funding related to specific projects, including the university centre in Grantham, and historic and future high streets funding. Members’ attention was also drawn to wider social and economic impacts against which a monetary value could not be put.
The presentation set out why InvestSK considered it to be beneficial for a private company to deliver this activity on behalf of the Council. Some of the reasons that were highlighted included:
- The perception of the council
- Engaging with a company was considered to provide quicker, easier access for businesses
- Businesses felt that they were dealing with a peer
- A culture of productivity that enabled an outcome-focused approach
- An external focus with confined areas of responsibility
- Distinctive brand identity recognised by a lot of organisations
- Costs of providing the service were considered to be lower than the same service provided by the Council because the pension liability was less and the company could negotiate on salaries for individual staff
- The ability to learn and adapt
Members of the Committee were given the opportunity to ask questions of the Chief Executive of InvestSK and its board members. In the first instance members were interested in the case for not providing these activities through the Council and what informed the shape and scope of InvestSK. The scope focused on generating a positive economic impact while the key themes had been identified as having a positive economic impact benefitted from being delivered in an integrated way. The rationale for InvestSK was providing a mechanism for the private sector to converse with the council on a similar footing. As a private company, InvestSK was able to operate remotely from the Council and engage directly, business to business. At the same time it was close enough to the Council to put forward any suggestions. The company also provided access to funding pots that would not, otherwise, be available for the Council to access.
A comparison was drawn with a number of other companies that provided similar services, including Opportunity Peterborough, Invest Gainsborough and a further company in Norfolk. These companies had found ways to become self-sufficient and generate income independently of public sector funding.
Members asked about the methodology that was used to calculate the figures around economic value and clarified whether figures provided by external parties had been challenged to verify their robustness. The committee was advised that the calculations were made using an industry standard and verified by an adviser who had previously worked with regional development agencies.
Clarification was sought that the jobs referred to in the presentation had all been within local businesses.
- Members asked for InvestSK to circulate the breakdown of newly created jobs
In response to a question, Members were advised that, were a business looking to grow and there were challenges around recruitment or property, InvestSK could use its contacts to find out about available opportunities at a very early stage.
When asked about InvestSK’s core funding, Members were informed that it was used to cover wages, overheads and office running costs. Further clarification was sought about whether the services provided through the core funding given to InvestSK were services that had previously been provided by the Council. There were also questions about which functions sat with InvestSK and which sat with the Council; the specific example was given of the arts centres. Members were informed that some of the staff who worked for InvestSK were seconded from the Council. Reference was also made to the added value that could come from the Involvement of InvestSK. Again, the example was given of work around arts centres, building the audience base and growing the provision of arts activity outside the arts centres.
One Member asked why the type of company had been selected in preference to a company limited by shares or delivery through the Council. It was suggested that if InvestSK had been a company limited by shares, then the Council would have had increased visibility of where its funding went.
One question addressed the terms and conditions of the staff that were employed directly by InvestSK; the lower pension contributions constituted a saving per head. Those staff who were seconded to InvestSK retained the terms and conditions of their council employment.
- Members asked InvestSK for the circulation of a list setting out which officers were on secondment to InvestSK and who worked directly for the company
A piece of work was underway to ensure the alignment of priorities between InvestSK and the Council. This was subject to any proposals working through the Council’s decision-making processes.
Reference was made to conversations to which some members had been party, that had considered whether the services provided through InvestSK could be brought back in-house and whether there would be a timeframe attached to that. It was clarified that to date no decision had been made to bring the service within house. Members were reassured that discussions about InvestSK and its priorities would be presented to the Companies Committee for discussion.
Conversation moved to the relationship between InvestSK and the Lincolnshire Local Enterprise Partnership (LEP). The Chief Executive of InvestSK reported that it enjoyed good relationships with the LEP, which had seen the benefit of having a local agency like InvestSK on the ground.
One member referred to the calling-in of the decision to form InvestSK, stating that it had predominantly been on the pretext of transparency. Reference was made to the requirement for the Council to publish expenditure in excess of £500, but the same provision was not available for council-owned companies.
A question was asked about a PR contract that had been let to a company that was not based within South Kesteven. Members were advised that contacts within the district had been exhausted and it had therefore been necessary to let the contract outside the district. The contract was a short-term retainer at a time when InvestSK was under-staffed. The result of the contract was an increased media spread for South Kesteven in the international marketplace.
Members asked where the direction for the company came from, challenging whether it came through the directors or the Chief Executive. The Council set the Memorandum of Understanding which detailed what it expected the company to fulfil, the directors set the direction for the company, which the CEO and executive would respond to. It was noted that since the recent change in directors, the number of board meetings had increased. Members asked whether those meetings were minuted; it was confirmed that they were.
- Members requested a copy of the minutes from the InvestSK AGM that signed-off the accounts; the Chief Executive of InvestSK to provide this
The Committee queried whether a statement on page 27 of the agenda reports pack regarding Directors’ Indemnity Insurance was correct as it referred to provision of an indemnity when an outcome was caused by negligence.
- Clarification to be provided on the legal position as to whether an indemnity would be provided in the event of negligence
In response to a question on the origin of the vision for InvestSK, members were advised that it featured in the governance manual and was derived from the Memorandum of Understanding.
Members requested sight of accounts for InvestSK and suggested a proposal should be produced that would meet the requirements of the Committee in terms of transparency without creating an industry to produce them. There were also questions about the type of information that Members could ask for; one example that was given was details of the grants awarded by InvestSK.
When undertaking work on grants, staff from InvestSK worked with the group to understand what they needed and whether that grant would be viable. Anecdotal feedback was provided that indicated that grant funding was difficult to access because there was no prescribed format. The Chief Executive for InvestSK said that very little funding had been awarded to date and before any group would receive funds they would need to provide a clear statement about what the money would be spent on.
- The Chief Executive and Directors of InvestSK to produce a proposal for sharing accounts with the Companies Committee
One of the questions put by members challenged which outcomes would still have been achieved had InvestSK not been created. Members also asked for greater clarity around the outcomes that had already been achieved and those that would be delivered in the future.
Clarification was provided in respect of the funding for the university centre and the high street bids. An indication had been received that a bid to Historic England had been successful. An award of £140,000 had also been made to develop a business case to attract monies through the future high streets fund. The Chief Executive of InvestSK stated that he did not believe that these three bigger pieces of funding would have been secured without InvestSK’s involvement. He also believed that the level of engagement with businesses had only been secured because of the work that had been undertaken by the team.
The second half of the presentation focussed on the InvestSK business plan, referring to financial review, potential alternative income and how sources of income could shift as the company develops.
Members were given the opportunity to discuss and make comment on the business plan. Several members suggested that, for a strategic plan, the document was long. The rationale was that the first part of the business plan constituted the strategic business plan while the second half captured thematic work programmes for the company’s core workstreams. Some members indicated that they found the information on the workstreams to be helpful.
There was interest amongst members of the Committee about the income streams coming back into the Council. Benefits highlighted by the InvestSK Chief Executive included business rates growth, attracting external funding to deliver interventions, and exploring what could be marketable to generate income. It was suggested that some enhanced services could be developed for which charges could be levied or templates that could be sold to other companies.
Members recognised the business plan as a working document and suggested that it should be reviewed and updated, then brought back before the committee in the next six-months. Members were also interested in how InvestSK could follow a self-funding model like Opportunity Peterborough and Invest Gainsborough. Members noted that in its first five years of trading, Opportunity Peterborough was predominantly funded by the public sector. As it started to develop, external funding programmes became a key workstream. It won a contract to provide services to its Local Enterprise Partnership and achieved a £3m grant for the smart city agenda. It also started selling its services to other local authorities, including South Kesteven, South Holland and Fenland district councils and developed a successful membership model.
There was the potential for the Council to procure services through InvestSK, as well as possible opportunities for InvestSK to acquire assets that it could rent out as a business hub.
Members’ discussion turned to the date on the business plan, which had been produced in February 2019; some comments suggested that the business plan should have been made available at an earlier time. Members felt that it was time for the plan to be refreshed, with the suggestion made that it should include more SMART deliverables and ambitious targets. The objectives were considered to be broad and some concern was expressed about the risk of ‘mission creep’. The InvestSK Chief Executive did not consider that there had been mission creep and the company had responded to the areas set out in the Memorandum of Understanding. There was however, a recognition that there was the opportunity to ensure that those areas generated income, which was the next stage of the company’s development.
The Committee also noted that there was no indication of a communications strategy. Councillors felt that InvestSK needed to develop a communication strategy with Members who could then cascade information to their electorate. One of the Directors stated that they had raised this matter with InvestSK’s Chief Executive, highlighting the perception that the company was a secret organisation that sat outside the Council but was funded by taxpayers. Since that meeting, staff from InvestSK had met with members to try and demystify their perceptions, however it was recognised that it was also important to demystify the company for the public.
One member queried the reference to 3-year budgets within the business plan document; these had not been included. Instead, the documents that were shared with the Committee included the first-year budget. One member also indicated that they would like to see the actual spend against budgeted figures to identify any variances.
- Copies of the 3-year budget projection to be circulated to committee members; information to be provided by InvestSK
A question was raised about sports development activity that had taken place earlier in the year and when feedback might be shared. The Chief Executive from InvestSK said that work was part of the Cultural Strategy and would inform leisure opportunities across the district. The cultural strategy would go through the Culture and Visitor Economy Overview and Scrutiny Committee.
- InvestSK to update its business plan and forward to the committee for consideration within the proceeding 6-months